Energy Efficient Lighting: Opportunities for the Illuminated
The Wall Street Journal’s “Venture Capital Dispatch” blog has a brief piece about some of the venture investment being directed towards the efficient lighting sector, which is currently dominated by Light Emitting Diode (LED) technologies.
The article quotes some enticing numbers, with Marc van den Berg of VantagePoint Venture Partners estimating that the LED market will grow from its 2008 size of $5 billion to reach around ten times that by 2020.
LEDs have actually been around for almost a century, and they’ve been mentioned in the same breath as mass market consumer lighting applications for a number of years, but the feeling within the industry is that we’re just now overcoming critical roadblocks that have prevented LEDs from replacing traditional incandescent light bulbs. The greatest opportunity for investors lies in identifying the companies that have innovative, effective and defensible solutions to the spectral issues, efficiency limitations and high costs that have delayed the long-anticipated growth spurt.
From a technical due diligence perspective, there’s lots to consider before investing in this area. Not all LEDs are created equal. In fact, there’s much to differentiate them, largely centred around material considerations. The long lifetimes often boasted about are achieved at the higher end of the market, but lower quality LEDs can fade much earlier and fall a long way short of the expected lifetime standards.
What’s more, it’s not always straight forward to compare propositions. The relatively immature market means that global standards and regulations to govern performance are not yet fully evolved. Nor is the terminology consistent, so it can be misleading for the untrained eye as different manufacturers refer to and quantify different aspects of device performance in different ways.
It’s also important to be aware of the speed with which the field is evolving at the moment. New breakthroughs are bringing better performance to the table all the time, so the LED investor needs to look beyond what the proposition is capable of today to what it will achieve tomorrow. Of course, that’s true for any cutting edge high-tech investment, but it’s particularly pertinent in this sector. That means the technical due diligence needs to cover engineering personnel, research facilities and product development roadmaps to ensure that the proposition company will remain ahead of the curve lest they be very quickly overtaken.
There’s a big opportunity here for those who choose wisely though. And we haven’t even mentioned organic LEDs. But that’s a whole different blog post…
Picture Credit: Flickr.com user oskay